Second Bank Failure in 2009

On January 16, the second bank failure of the year took place.  Bank of Clark County was closed on Friday by Washington State regulators, and the FDIC was named receiver.  To protect the depositors, the FDIC entered into a purchase and assumption agreement with Umpqua Bank, Roseburg, Oregon, to assume the insured deposits of the Bank of Clark County.  With two banks failing on the same day may be a sign of serious bank portfolio troubles brewing.

Thankfully for the FDIC, most depositors have little to worry about it.  Bank of Clark County will reopen on Tuesday, due to the Martin Luther King, Jr. holiday, as branches of Umpqua Bank.  Depositors of the failed bank will automatically become depositors of Umpqua Bank.  Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship to retain their deposit insurance coverage.

Over the weekend, customers of Bank of Clark County can access their insured deposits by writing checks or using ATM or debit cards.  Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual.

One concern for those rate shoppers that view bank rating services is that some of these services rated this bank with an above average rating.  Since rating services acquire most of their data from publicly disclosed bank finances that are reported for previous quarters, the data’s timeliness is suspect and clearly in some cases severely flawed.

The FDIC released additional information about the bank transfer to Umpqua Bank.  In addition to assuming the failed bank’s insured deposits, Umpqua Bank will purchase $30.4 million of assets comprised of cash, cash equivalents, marketable securities and loans secured by deposits. The FDIC will retain the remaining assets for later disposition.

According to the FDIC, as of January 13, 2009, Bank of Clark County had total assets of $446.5 million and total deposits of $366.5 million.  At the time of closing, there were approximately $39.3 million in uninsured deposits held in approximately 138 accounts that potentially exceeded the insurance limits.  This amount is an estimate that is likely to change once the FDIC obtains additional information from these customers.

The FDIC describes the action as the transaction ais the least costly resolution option, and the FDIC estimates the cost to its Deposit Insurance Fund will be between $120 and $145 million.  Bank of Clark County is the second FDIC-insured institution to be closed this year.  Bank of Clark County is the first bank to fail in the state of Washington since Emerald City Bank, Seattle, on July 2, 1993.

Tags: bank failures, FDIC, Umpqua Bank

This entry was posted on Monday, January 19th, 2009 at 12:31 am and is filed under Money Rates. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.